Venture Funding Growth Rate Slips

November 6, 2000 (PLANSPONSOR.com) - For the first
time in more than two years venture capital investment fell
in the third quarter. Still, the $79.9 billion invested so
far this year is 137% more than the comparable period a year
ago according to the National Venture Capital
Association.

During the third quarter of 2000, $25.9 billion was
invested in 1,774 companies according to Venture Economics
and the National Venture Capital Association. That
was slightly lower than the $27.8 billion and $27.8 billion
recorded for the prior two quarters of 2000.

Of the third quarter totals, Internet related companies
continued to attract a significant 44.55% of the funding,
roughly the same as the 45.18% a year ago, despite a $4.4
billion drop-off in funding for the category. On the
other hand, communications companies drew 18% of the
quarter’s funding, up 25.7% from the second quarter, and
over 44% higher than a year ago.

Lower returns and less demand for initial public
offerings (IPOs) are reportedly contributing to the
slackening level of investment. Venture returns fell
to 3.9% in the second quarter – lowest since 1991, while
the $26 billion raised in IPOs during the quarter was the
first time below $30 billion in a year.